A more corporate approach by financial planners to clients will be the best outcome of the current government reforms, a large wealth management firm has said.
Equity Trustees head of wealth management Phil Galagher said that while the financial planning profession is undergoing significant change, “the scope and style of that change can still be influenced and, in my view, the best outcome will be one that reflects a more ‘corporatised’ approach by financial planning firms to relationships with clients”.
Galagher said “natural evolution will also play a major part if planning firms respond correctly to the ever-changing and more sophisticated needs of clients.”
Firms with foresight would create a service approach with clients that relied less on individual adviser relationships and more on developing a “total firm” service approach, he said.
This would be much healthier for the business owner, create a more sensible relationship for individual advisers under the government’s Future of Financial Advice (FOFA), and be infinitely better for clients, he added.
The Association of Financial Advisers (AFA) president Brad Fox agrees though has reservations about business models.
Fox said there was “no doubt that this is the way that the industry has been moving for some time and licensees actually encourage this movement”.
He said the AFA’s position was that succession planning was one of the key issues that advice businesses faced, and a corporatised model better enabled the transfer of ownership.
“A good market place is one that encourages a variety of business models to co-exist. In that type of market, innovation can be rewarded. Particularly in financial advice, protection of the client’s best interests is paramount, and the legislation is specific in this area,” he said.
However, the AFA said with reference to business models, there needed to be an alignment between each client and the type of business with which they would feel comfortable maintaining a relationship.
“Some want the corporate ‘feel’, some prefer the suburban or local feel,” Fox said.
“The competitive tensions between customer intimacy and practice efficiency needs time to play out.”
Increasingly, Galagher said advisers would face situations with clients where they needed specialist capabilities and knowledge to provide appropriate advice.
FOFA legislation requires advisers to decline to give advice to clients if they do not have the skills, knowledge and expertise in the area needed.
FOFA legislation subsection 961B (2)(g) also demands that advisers act in the best interests of clients when advice was given.
An increasing number of clients would need financial advice about aged-care costs and alternative strategies.
“This is a specialist area and not all planners will have the depth of knowledge required to advise elderly clients on the ramifications involved,” Galagher said.
Financial planning firms could look outside the profession to see examples of structures where continuing and collective specialist advice and knowledge could be accessed when needed.
For example, accounting and legal firms had long been managed so that various specialist practices can be accessed by clients whenever required. Most medium-sized accounting firms now offered tax advice, audit, business services and the like.
